Should I convert to a Roth IRA?

Roth IRA is a great way for clients to create tax-free income from their retirement assets. Yet, keep in mind that when you convert your taxable retirement assets into a Roth IRA you will generally pay ordinary income tax on the taxable amount that is converted. The conversion amount is not subject to the 10% early distribution penalty. Your tax-free potential is maximized if you pay the taxes from your current income or personal savings and not from your IRA. Individuals of all income levels are eligible to convert to a Roth IRA.

Assumptions

Current age

Age when income should start

Number of years to receive income

Before-tax return on savings (accumulation phase) (%)

Before-tax return on savings (distribution phase) (%)

Income tax bracket (accumulation phase) (%)

Income tax bracket (distribution phase) (%)

Current IRA balance ($)

Non-Deductible portion of IRA balance ($)

How will you pay the conversion tax?1) Pay taxes from non-IRA assets2) Pay taxes from proceeds of Roth conversion

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